Newsletter > October 2014View/Download this newsletter in PDF
In this issue: 1. News & Upcoming Events 2. S.C.C. Releases Decision in Thibodeau Appeal 3. Loss Transfer in Ontario 4. News From Transport Canada 5. Trucking Operations: Subject To Federal or Provincial Law? 6. Update on Ship Arrest
1. News & Upcoming Events
- Gordon Hearn will represent the firm at the Transportation Law Institute on November 7 and at the Executive Committee Meeting of the Transportation Lawyers Association on November 8th. Kim Stoll will be moderating a panel, “The Transportation of Dangerous Cargoes”, at the Transportation Law Institute. Both events are being held in St. Louis, Missouri.
- Rui Fernandes will be presenting a paper on “New Developments in Maritime Law Affecting Vessel Operators” at the Canadian Passenger Vessel Association annual meeting to be held in Toronto on November 19 to 21.
- James Manson joined the Fernandes Hearn LLP team in October. James was called to the Bar in 2008.
- The Canadian Board of Marine Underwriters will be holding its fall conference at the Royal York Hotel on December 2nd 2014.
- The Transportation Club of Toronto will be holding its annual dinner at the Royal York Hotel in Toronto on December 4th 2014.
- The Fernandes Hearn LLP Annual Seminar will be held in Toronto on January 15th 2015. Stay tuned for the program.
2. Supreme Court of Canada Gives Resounding “Non” to Thibodeau AppealIt is perhaps surprising that the impetus for Canada’s highest court to weigh in for the first time on the status before domestic tribunals of the 1999 Convention for the Unification of Certain Rules for International Carriage by Air, more commonly known as the “Montreal Convention 1999”, was the unilingual service of soda by Air Canada on international transborder flights into Toronto Pearson airport. Although at first blush trivial, the factual backdrop of the lawsuit initiated by Michael and Lynda Thibodeau raised a sufficiently fundamental and polemical issue that, in May 2013, the Supreme Court granted leave to the petitioners to appeal a 2012 decision of the Federal Court of Appeal on the matter (*1). The Supreme Court heard arguments on March 26, 2013 and released its much-anticipated judgment on October 29, 2014 (*2). The Thibodeaus started their journey, which ended at the Supreme Court in 2011, when they were heard by the Federal Court on their claims for a declaratory order, punitive and exemplary damages and an institutional order against Air Canada. The source of the Thibodeaus’ complaints were Air Canada’s alleged failures in 2009 to provide bilingual services at various points of contact over the course of two transborder round-trip itineraries. Air Canada, uniquely amongst airlines and by virtue of its historic status as a Crown corporation, is subject to the Official Languages Act (“OLA”) (*3). Section 10 of the Air Canada Public Participation Act (*4) expressly foresaw that post privatization, the flag bearing airline would continue to be bound by the OLA which secures the provision by Federal institutions of service in English and French wherever there is significant demand for the minority language. The specific obligations of Air Canada can be found in the Official Languages Regulations (*5) which provide that service must be bilingual at all Canadian airports handling more than 1 million passengers annually and also at all other airports, where demand for the minority language represents at least 5 per cent of the body of passengers. In respect of flights, certain routes are per se designated by the Regulations as requiring bilingual service whereas, for the balance of flights, the 5 per cent demand is also used as the threshold. Although, originally, the Thibodeaus complained to the Commissioner of Official Language with respect to unilingual service provision at eight points of contact over the course of their two roundtrips, litigation ultimately boiled down to four admitted violations by Air Canada of the OLA and its regulations. On July 13, 2011, Bédard J. for the Federal Court awarded the Thibodeaus damages of $6,000 each and made an institutional order against Air Canada requiring reasonable efforts on the part of the airline to make efforts to comply with its obligations under the OLA and to introduce a monitoring system and procedures to quickly identify, document and quantify potential violations of its language duties. Air Canada successfully appealed to the Federal Court of Appeal. The basis for the appeal of the damages order was that the trial judge wrongly awarded damages which were excluded under the Montreal Convention 1999, which is given effect as a part of Canadian Federal law by the Carriage by Air Act (*6). The Convention was argued to form an exclusive code for monetary indemnification for damages incurred over the course of international transportation by air. As the Convention confers liability upon the air carrier in its Article 17-19 only for death, personal injury, damage to baggage, damage to cargo and delay, and given that Article 29 of the Convention resolutely excludes the award of damages on any other basis, Air Canada took exception to the award of damages by the Federal Court for moral prejudice suffered by the Thibodeaus absent death or personal injury which were rather caused by the admitted failure to provide bilingual services where requisite under the OLA by the airline. The apparent conflict between the wide-ranging remedial powers granted to the courts in the OLA and the exclusion of damages under the Montreal Convention 1999 did not escape Bédard J. at the trial level (*7). However, that judge ruled in favour of giving precedence to the OLA, which enjoys quasi-constitutional status and thus derogating from the Montreal Convention, which, explained the court, “does not compromise Canada’s international obligations or undermine their integrity. The OLA does not apply to any other carrier subject to the Montreal Convention. Furthermore, if Air Canada is subject to the OLA, that is not due to its activities as an international carrier, but its status as an “old” federal institution. Air Canada’s duties as to the official languages do not interest or concern any other signatory country of the convention. A departure from the Montreal Convention to ensure the efficacy of proceedings aimed at enforcing Air Canada’s duties as to the official languages has no effect on the other signatory countries of the Convention, and does not weaken the Convention or imperil the integrity of the uniform liability regime it enshrines.” In 2012, the Federal Court of Appeal reversed the trial level decision both in respect of the award of damages and the institutional order rendered by the Federal Court. Trudel J.A. gave reasons for its judgment (*8) reasoning that the OLA and the Montreal Convention 1999 were not truly in conflict with each other given that there was a way in which the two instruments could be read in harmony, and could be applied concurrently without rendering an unreasonable decision. The award of damages for violations of the OLA is was curtailed to “appropriate circumstances” and, in the factual matrix of the Thibodeaus’ claim, the circumstances were not favourable to an award of damages given the overarching Montreal Convention 1999, to which Canada subscribes. Other remedies could have been ordered by the trial court, although, given that alternative remedies were not pleaded by the parties, Trudel J.A. did not delve further into what would have been a proper order. In respect of the institutional order entered at trial level, the Federal Court of Appeal overturned this order on the grounds of its imprecise wording and problematic implementation and the related problems of ensuring compliance. The scope of the order was overly broad and beyond what as necessary to remedy the violations of the Thibodeaus’ language rights. The Supreme Court confirmed the position of the Federal Court of Appeal, albeit with two dissenting voices. Cromwell J. delivered the reasons of the majority of the court and, at the outset, articulately captured why the case had reached the highest court: “The issue of damages sits at the intersection of Canada’s domestic commitment to official languages and its international commitment to an exclusive and uniform scheme of damages liability for international air carriers. The question thus implicates two important values”. Cromwell J. first set out to deal with a three-pronged attack by the appellant Thibodeaus and the Commission of Official Languages as to whether the Montreal Convention does in fact preclude per se an award of damages to the Thibodeaus. In respect of the appellants’ arguments that The Montreal Convention applies only to private law claims, not statutory claims, in relation to fundamental rights such as language rights, Cromwell J. strictly interpreted the exclusivity provisions of the Convention. Citing case law from a host of other signatory States including the UK, US, France, Hong Kong, Ireland, Singapore and New Zealand, the court found “a strong current of jurisprudence make it clear that the exclusivity of the liability scheme established under the Montreal Convention extends at least to excluding actions arising from injuries suffered by passengers during flight or embarkation and debarkation when those actions do not otherwise fall within the scheme of permitted claims”. As such, the court found the appellants asked the wrong question when they queried whether the Montreal Convention specifically excluded their claims, given that the structure of the Montreal Convention rather broadly excludes all claims for damages save those expressly permitted. Importantly, the court found that the appropriate lens through which to consider whether damages are excluded from being awarded under the Montreal Convention 1999 is through the nature of the claim (i.e. one for damages), rather than the legal foundation upon which the claim is premised (i.e. public law vs. private law). Secondly, the court summarily dismissed the argument made that, in line with a host of European Court of Justice (“ECJ”) judgments (*9), a claim is not doomed by virtue of the Montreal Convention 1999 where it is for standardized damages as opposed to individual damages. The appellants sought to draw the analogy was with automatic compensatory schemes operated within the European Union regarding cancellation and delay to and which have been upheld by the court even where they appear, at first blush, to be inconsistent with the Montreal Convention. The Supreme Court declined to draw itself into the debate over the correctness of the controvertible position adopted by the ECJ, and rather preferred to draw a clear distinction between the European regime dictating automatic entitlement to the prescribed legislative remedy and the remedy awarded by the Federal Court for the violations of the OLA, which were discretionary and tailored to compensate the individual prejudice claimed by the appellants to have resulted from the violations. In response to the third argument that the claims were not circumvented by the text of the Montreal Convention (the premise of which was that the faults of Air Canada were institutional and predated the actual flight and thus were not covered by the temporal scope of application of the Convention), the Court adopted recent UK Supreme Court precedent (*10) to the effect that such an interpretation would distort the Convention since the majority of accidents or mishaps in aviation can be traced back to “earlier operative causes”. The Supreme Court thus found that the appellant’s claims had been correctly found by the Federal Court and Federal Court of Appeal to be inadmissible in light of the Montreal Convention 1999. The Court then however had to proceed to elect between the positions of the lower courts, which diverged on whether the exclusion survived an alleged conflict with the OLA. Cromwell J., for the court on this point, came down strongly on the side of Trudel J.A. and declined to find that the two norms were, in fact, in conflict. Borrowing from Bastarache J.’s past decisions, Cromwell stated that, “an interpretation which results in conflict should be eschewed unless it is unavoidable” and, therefore, “we should be slow to find a conflict in the narrow point at which the schemes overlap”. As such, the court found that the Montreal Convention and the OLA merely overlapped at a narrow point of intersection and that it would be improper to find, in the narrow scope of such overlap, that the two norms could not be read in harmony such that remedial measures for violation of the OLA, within the scope of international flight covered by the Montreal Convention, should be other than damages to the complainant. In respect of the institutional order, the court further agreed wholly with the Federal Court of Appeal. In respect of the requirement that Air Canada abide by the OLA, Cromwell J. stated that, “those types of orders should only be made in exceptional circumstances which do not exist here.” In respect of the order to implement a monitoring programme for conformity with the Montreal Convention, it was held that “the order is too imprecise, risks ongoing litigation and court supervision in relation to whether it is being complied with, and is inappropriate particularly in light of the Commissioner’s statutory powers and expertise in relation to monitoring compliance with the OLA.” Abella and Wagner JJ. Dissented dissented, with their reasons being given by Abella J. . The crux of Abella J.’s reasons was, “In my view, Article 29 of the Montreal Convention should be interpreted in a way that is respectful of the protections given to fundamental rights, including language rights, in domestic legislation” given that, “just as Parliament is not presumed to legislate in breach of a treaty, it should not be presumed to implement treaties that extinguish fundamental rights protected by domestic legislation.” Although the minority decision reaches for support in the drafting of the Montreal Convention 1999, the reasons of the majority are more persuasive and bring Canada squarely into line with the quasi-consensus of the upper courts of signatory States of the Montreal Convention 1999 regarding the operation of Article 29 of the Convention, giving renewed foundation to litigators across Canada who rely on the Montreal Convention 1999 and the interpretation given thereto by overseas court as governing international aviation claims. Mark Glynn Endnotes (*1) Michel Thibodeau et al v. Air Canada et al, Docket 35100, 2013 CarswellNat 1235 (*2) Thibodeau v. Air Canada, 2014 SCC 67 (*3) RSC, 1985 c 31 (*4) RSC, 1985 c 34. (*5) SOR 92-48 (*6) R.S.C., 1985, c. C‑26. (*7) 2011 FC 876 (*8) 2012 FCA 246 (*9) Most recently, Nelson v. Deutsche Lufthansa AG, C‑581/10 and C‑629/10,  1 C.M.L.R. 42 (*10) Stott v. Thomas Cook Tour Operators Ltd.,  UKSC 15
3.Loss Transfer in OntarioAccidents involving trucks may mean that a lawsuit will be commenced by an injured party against the owner and driver of the truck; however, it will also likely mean a request for reimbursement of Statutory Accident Benefits (“accident benefits”) payments made by the insurers of any smaller vehicle involved by the insurer of the truck or “heavy commercial vehicle”, as defined. The truck’s insurers will expect to receive such a “Notice of Loss Transfer” or “Request for Indemnification” and should be aware of the various factors involved. The Ontario Loss Transfer Regime The purpose of the Loss Transfer regime is to balance the costs and spread the risk between the insurers of different sizes of vehicles. It is effectively a loss re-allocation, since the risks assumed by insurers of smaller vehicles (e.g. motorcycles, snowmobiles, small cars) may be disproportionately large compared to the risks of insuring a heavy commercial vehicle; specifically, with respect to the potential for injury. Embodied within the Regulations to the Insurance Act of Ontario R.S.O. 1990, c.I.8. and s. 275, as amended, the regime (the “Loss Transfer Rules”) governs indemnity for the payment of accident benefits, i.e. no-fault medical and other payments made to injured victims of motor vehicle collisions including treatment expenses (physiotherapy, rehabilitation, prescription medications etc.), attendant care, income replacement, and housekeeping expenses. Typically, each insurer will bear the cost of the no-fault accident benefits paid to its own insured, but, when a heavy commercial vehicle is involved in an accident with a smaller vehicle, the insurer of the smaller vehicle (“first party insurer”) will make claim for the reimbursement of paid accident benefits under the Loss Transfer Rules from the insurer of the heavy commercial vehicle (“second party insurer”). There must, however, be at least partial liability on the part of the heavy commercial vehicle driver before its insurer must reimburse the first party insurer. If the truck is not liable, then no reimbursement is required. Reimbursement is made in accordance with the relative degrees of liability of the drivers (see “Fault Determination Rules”, below). Where a dispute occurs over liability or quantum of reimbursement under the Loss Transfer Rules, the Regulations to the Insurance Act stipulate that an arbitrator must be appointed to address the dispute. Typically, the insurers agree on a private arbitrator and enter into an arbitration agreement that allows the parties to agree on various issues including the extent of any award of costs or the available grounds of any appeal, which may include both errors of fact and law. If there is no arbitration agreement, then the Arbitrations Act S.O. 1991, as amended, will govern and any appeal will lie to the Ontario Superior Court of Justice and only on the issue of whether the arbitrator made an error in law as opposed to both fact and law. Also, any award of costs will be left in the discretion of the arbitrator (*1). Application of the Loss Transfer Rules To apply, an at fault vehicle must be considered a “heavy commercial vehicle”, which is defined as a “commercial vehicle” used to transport materials, goods, tool and/or equipment and having a gross weight greater than 4500 kilograms (*2). The Ontario Superior Court of Justice considered the issue of what constitutes a “heavy commercial vehicle” in Republic Western Insurance v Economical Mutual Insurance (*3). The issue was whether the 4500 kilograms of weight referred to the actual weight of the vehicle itself or whether this includes its weight and its overall cargo capacity (“the full capacity weight”). In Republic Western Insurance v Economical Mutual Insurance, a 4-door Toyota insured by Economical Mutual Insurance (“Economical”) was rear-ended by a Ford E1-G truck rented from U-Haul that had a full capacity weight of 4989.5 kilograms. At the time of the accident, however, the truck’s weight was only 3730 kilograms. If the definition of “heavy commercial vehicle” referred to full capacity weight, then the Loss Transfer Rules would not apply. The two insurers could not agree and the matter was arbitrated. The arbitrator held that “4500 kilograms” in the Regulation referred to the full capacity weight of the vehicle and not to its actual weight at the time of collision and, therefore, ordered Republic Western Insurance (“Republic”), the insurer of the U-Haul truck, to reimburse Economical. Republic appealed. Economical argued that a commercial truck may make several deliveries during the day and that application of the “actual weight” at the time of an accident would introduce uncertainty and unpredictability into the regime whereas use of the “full capacity weight” would ensure that there never would be an issue of whether the vehicle was a “heavy commercial vehicle”. In dismissing this argument, the Court allowed the appeal and confirmed that “gross vehicle weight” meant the “actual weight” of the heavy commercial vehicle at the time of the accident. The Court reasoned that since the “actual weight” of such a vehicle relates to the damage “actually” caused rather than to theoretical damage, using the truck’s actual weight in fact gives greater effect to the meaning and purpose of the Loss Transfer Rules, i.e. a re-allocation of risk in accordance with the varying “actual” potential for injury (*4). The Fault Determination Rules In Ontario, the apportionment of fault between two vehicles under the Loss Transfer Rules is based upon the “Fault Determination Rules”. These rules describe typical accident scenarios, assigning pre-determined percentages of fault. If none of scenarios in the Fault Determination Rules apply to a particular accident then fault will be determined in accordance with the ordinary rules of law. In State Farm Mutual Automobile Insurance Company v Old Republic Insurance Company of Canada (*5), the Ontario Superior Court of Justice recently interpreted Rule 9 of the Fault Determination Rules with respect to a chain reaction collision involving several vehicles, including a heavy commercial vehicle. Rule 9 states that the rear-ending vehicle in a chain reaction collision is responsible for 100% of fault for the resulting collisions ahead, barring unusual circumstances. In this case, a Pepsi truck insured by Old Republic Insurance Company of Canada (“Old Republic”) struck a Dodge vehicle that, in turn, struck a Nissan. In a separate but related collision, the Nissan then struck a fourth vehicle, a Lexus, insured by the applicant State Farm Mutual Automobile Insurance Company (“State Farm”). The driver of the Lexus was paid accident benefits from State Farm, which, in turn, sought indemnification from Old Republic pursuant to Loss Transfer. The arbitrator held that Old Republic was required to indemnify State Farm despite the fact that there was no direct collision between their respective insured vehicles. Old Republic appealed the arbitrator’s decision, arguing that to hold them liable to indemnify State Farm would be an absurd result and that underwriting of heavy commercial vehicles in Ontario would thereby be adversely affected. The Court dismissed the appeal, ruling that a rear-ending vehicle that causes a chain reaction is 100% liable for all of the collisions that, in turn, follow. The court’s affirmation of Rule 9 of the Fault Determination Rules accords with the ordinary rules of law concerning liability for rear-end motor vehicle accidents in general. Time-bar and Laches In Zurich Insurance Company v TD General Insurance Company (“Zurich v TD”), as recent 2014 case (*6), the Ontario Superior Court of Justice ruled that the heavy commercial vehicle insurer must indemnify the first party insurer for a 1999 collision and accident benefits paid over a 10-year period. Approximately 11 years after the accident, TD General Insurance Company sent Zurich Insurance Company a Notice of Loss Transfer alleging that Zurich’s insured was 100% at fault. Zurich refused and the matter was arbitrated. Earlier court decisions had held that a two-year limitation period applied to arbitrations under the Loss Transfer Rules and that such limitation began to run from the day after the first party insurer sent the Notice requesting indemnity to the second party insurer. Following these earlier decisions, the arbitrator in Zurich v TD held that the application to arbitrate was allowed, as it was brought within two years after the Notice of Loss Transfer was sent. The Zurich appealed, alleging that the equitable doctrine of laches (*7) should apply due to the prejudice caused by TD’s late Notice of Loss Transfer, given the amount of time that had passed since the accident. Earlier in 2013, in Intact Insurance Co. of Canada v. Lombard General Insurance Co. of Canada (*8), the Notice of Loss Transfer was not sent until about 4.5 years after the loss and a defence of laches was raised. In that case, the arbitrator dismissed the Intact claim and, on appeal, the court found that the Loss Transfer claims were “devoid of equitable relief and inappropriate to grant the equitable laches defence which would dismiss the action. The judge ordered that Lombard pay Intact’s claim as per its statutory right of indemnification. However, the Court in Zurich v TD agreed that the application for arbitration of the Loss Transfer claim was properly brought within the two-year limitation period; however, given the 11-year delay, a prima facie case for the equitable doctrine of laches was made out. The Court reasoned and contrary to the Intact v Lombard case above, at para 22, that “Ontario’s loss transfer regime possesses an equitable flavour because it is designed to address unfairness between participants in the province’s insurance industry…Alternatively, I find that the fusion of law and equity, which has evolved in order to achieve fairness and justice, requires a finding that laches can apply in this case.” In order to invoke the equitable doctrine of laches, the party seeking to use the defence must show actual prejudice. The Court in Zurich v TD agreed with the arbitrator’s ruling that there was no actual prejudice caused to Zurich, as it had knowledge both of the accident and the personal injury claims of TD’s insured throughout the 11 year period. There was no suggestion that liability or damage documentation was no longer available. The Court ruled, however, that given the inordinate amount of time between the accident and the request for indemnity, there was acquiescence on the part of TD in not sending out the Notice to Zurich sooner. TD was therefore precluded from pursuing indemnity against Zurich at this late date. The Court allowed the appeal and set aside the arbitrator’s decision. Rolling Limitation period Updated Most recently, on September 2, 2014, the issue of the two-year limitation period was again considered by the Ontario Superior Court of Justice in The Economical Mutual Insurance Company v Zurich Insurance Company (*9). In this case, the loss occurred in 2005 and Economical sent a Notice of Loss Transfer and a Loss Transfer Request for Indemnification in January 2006 to Zurich, the insurer of the at fault driver of a heavy commercial vehicle. There were several other requests over time in respect of ongoing payments including a final request for indemnification dated January 2012 after the entire underlying accident benefits claim was settled. Zurich did not pay the earlier requests and arbitration had been initiated in November of 2009. The arbitrator found that first Request for Indemnification of 2005 was time barred but the others requests were not. Zurich appealed and the court held that each Request for Indemnification invoked a separate limitation period, a “rolling 2 year limitation period” and confirmed that only one initiation of arbitration was necessary to protect all such requests even if there were further requests for indemnification later on. To Whom does Loss Transfer apply? Loss Transfer potentially applies to all insurers who are licensed to sell insurance in Ontario, regardless of where the policy was issued and regardless of where the accident occurred, whenever accident benefits are paid to an Ontario policyholder. In 2010, a case arose out of an accident that occurred in North Carolina, U.S.A. involving an Ontario resident who operated a motorcycle and who was insured by Primmum Insurance Company (“Primmum”) (*10). Primmum paid accident benefits to its injured policyholder. The at-fault driver of the heavier vehicle was insured by Allstate Insurance Company (“Allstate”) under a policy that was issued in North Carolina. Primmum sought to be indemnified but Allstate refused to reimburse Primmum for its accident benefits payments (*11). Primmum served Allstate with a Demand for Arbitration; however, Allstate refused to participate in the arbitration on the basis that the accident did not occur in Ontario and the policy in question was issued by Allstate, an American insurer. Allstate’s position was that it should not have to comply with the Loss Transfer provisions of Ontario Insurance Act.The Ontario Court of Appeal ruled against Allstate, confirming that Allstate was indeed considered to be an “Ontario insurer” for the purposes of the Insurance Act and that, therefore, it was required to arbitrate. Allstate sells insurance in Ontario and, therefore, Allstate is considered to be an “Ontario insurer” and is subject to the Insurance Act of Ontario, despite the fact that the policy in question was issued in North Carolina and the accident occurred there. Challenges to the Quantum Paid by the First Party Insurer The second party insurer has the right to dispute the amount of benefits paid by the first party insurer to its insured. According to the Regulation however, the onus of proof is on the second party insurer to prove that such payments were unreasonable, being a very high standard of proof. The test is not whether the second party insurer would have made the same payments to the insured, but whether the payments made were “reasonable” under all the circumstances. Only in extremely rare circumstances will a second party insurer successfully challenge the amount of accident benefits paid. The quantum of benefits is not realistically subject to any serious challenge, as practically speaking each insurer is motivated by its own business interests not to overpay its insured. Finally The reach of the Loss Transfer Rules is very broad indeed. Insurers of heavy commercial vehicles operating in Ontario need to be aware of the Loss Transfer regime, as they may become liable for reimbursement of the accident benefits paid out to the occupants of a smaller vehicle with whom their insured has had a collision, on the basis of relative percentage of liability. The law is that a Notice of Loss Transfer must be sent out within a reasonable time in order to avoid the equitable doctrines of laches and acquiescence and subject to the rolling limitation period of two years. Challenges to the quantum of accident benefits paid out are unlikely to succeed. Whether or not the Loss Transfer regime will apply to a particular heavy vehicle will depend on the actual weight of the vehicle at the time of the accident, not the full capacity weight. In chain reaction collisions involving multiple automobiles, if the rear-ending vehicle is a heavy commercial vehicle that vehicle’s insurer may be subject to claims for reimbursement of accident benefits paid to the occupants of any of the vehicles ahead, on a 100% basis. Out of province insurers of heavy commercial vehicles need to be aware that if they do sell auto insurance in Ontario, they may receive a claim for reimbursement of accident benefits under Loss Transfer, no matter where the policy in question was underwritten and no matter where the accident took place. Kim E. Stoll and Chella Turnbull Endnotes *1 The decision as to whether to have an arbitration agreement is key. It may be that the parties cannot agree on how to handle costs, for example, and may look to the Arbitrations Act instead, keeping in mind the limits involved with the grounds of appeal. (*2) Ontario Automobile Insurance Regulations RRO 1990 Reg 664 (*3) 2012 ONSC 5952 (*4) supra, at para 18 (*5) 2014 ONSC 3887 (*6) 2014 ONSC 3191 (*7) The equitable doctrine of laches refers to unreasonable delay causing prejudice that can result in barring claims for relief. (*8) 2013 ONSC 5878 (*9) 2014 ONSC 4763 (*10) Primmum Insurance Company v. Allstate Insurance Company, 2010 ONCA 756 (*11) There are various types of vehicles or “classes” which are eligible for reimbursement under the Loss Transfer Rules, including motorcycles.
4. News From Transport CanadaRail On October 29th, 2014 the Minister of Transport announced new measures designed to address the Transport Safety Board of Canada’s (“TSB”) recommendations stemming from its final report on the Lac-Megantic train derailment. The TSB issued two recommendations and two safety advisories to the department. In response, Transport Canada is:
- Requiring railway companies to meet standardized requirements for hand brake application and put into effect additional physical defences to secure trains;
- Increasing oversight by recruiting additional staff to carry out more frequent audits and creating processes for increased information sharing with municipalities
- Conducting further research on crude oil properties, behaviour and hazards and launching a targeted inspection campaign to verify the classification of rail shipments; and
- Requiring certain railways (including short lines) to submit training plans to Transport Canada for review, and conducting an audit blitz of short lines to determine specific training gaps
- Only fly your aircraft during daylight and in good weather (not in clouds or fog).
- Always be able to see your aircraft with your own eyes – not only through an on-board camera, monitor or smartphone.
- Make sure your aircraft is safe for flight before take-off. Ask yourself, for example, are the batteries fully charged? Is it too cold to fly?
- Know when to apply for a Special Flight Operations Certificate
- Respect the privacy of others – for example, avoid flying your aircraft over private property or using it to take photos or videos without permission.
- Any closer than 5 miles (8 km) from any airport, heliport or aerodrome.
- Higher than 300 feet (90 metres) above the ground.
- Within restricted airspace (such as military bases, prisons, forest fire areas).
- Closer than 100 feet (30 metres) from vehicles, boats, buildings, structures or people.
- In populated areas or near large groups of people (such as at sporting events, concerts, festivals, firework shows).
- Where or when you could interfere with any first responders (fire department, police, etc) as they conduct their duties.
- Near moving vehicles. Avoid highways, bridges, busy streets or anywhere you could endanger or distract drivers.
- You use your aircraft for work or academic purposes, such as aerial photography, geomatic surveying, crop observation, advertising, research and development, etc.)
- Your aircraft weighs more than 35 kilograms (77 pounds) regardless if you use it for work or pleasure.
5. The “Continuous and Regular Test” Upheld in Assessing Whether Trucking Operations are Subject to Provincial or Federal LawIntroduction In Canada the legislative authority over transportation undertakings is shared between the Parliament of Canada and the Provincial Legislatures. The federal government has exclusive jurisdiction over interprovincial (i.e. transit over provincial borders) and international transportation undertakings, whereas the provinces have exclusive jurisdiction over “local” or intraprovincial transportation undertakings. This division of legislative authority is not always clear. Sometimes the legislative jurisdiction between the two levels seems to blur or intersect, potentially challenging a trucking company’s efforts towards regulatory compliance. The recently published decision in Total Oilfield Rentals Limited Partnership v. Canada (Attorney General) (*1) provides an illustration of the challenge in determining what law governs an operation . Facts Total Oilfield Rentals Limited (“Total Oilfield”) is in the oilfield services industry with its head office located in Whitecourt, Alberta. Its primary business is renting industrial equipment. Total Oilfield owns and operates a sophisticated fleet of trucks. This trucking operation consists mainly of delivering and retrieving rental equipment to and from Total Oilfield’s customer job sites (being 90 to 95% of trucking operations) with the occasional haulage of third party goods for hire (being 5 – 10% of the operations). Total Oilfield has 21 branches: 15 in Alberta, 3 in British Columbia, 2 in Saskatchewan and 1 in North Dakota. When a customer requests a piece of rental equipment it is normally dispatched from the closest rental branch within the province where the customer is located. However, when needed, equipment is not within the job site’s province, it will be shipped across provincial boundaries from the nearest location in the next province. To facilitate cross-border transportation, Total Oilfield’s trucks are registered with the “Prorate” program. The Prorate program allows a commercial vehicle to operate in multiple jurisdictions using a single licence plate from its own jurisdiction. Vehicles that are not prorated require permits for each cross-border trip. According to the Alberta Transportation Ministry:
Prorate is the process of calculating registration fees and taxes for multiple jurisdictions. Prorated registrations are applicable to commercial carriers who are based in Alberta. To be considered for prorate registration, vehicles must travel inter-provincially and/or internationally in Alberta and at least one other province or state. Rather than obtaining and paying for plates and registration in each jurisdiction, Prorate offers the advantage of proportionate licensing in Alberta. The fees are calculated by the percentage of total distance travelled within each jurisdiction.Trucking safety is dictated in large part by the provisions of the National Safety Code (“NSC”) being a uniform set of standards in effect across Canada. The Alberta Transportation Ministry conducted an NSC audit on Total Oilfield in May of 2012. The audit revealed an unacceptable non-compliance rate of 30% with NSC standards, with a “(driver) fatigue violation rate” of 63% in respect of “Hours of Service” criteria. As a result, an administrative penalty was assessed of $10,000 against that company for violating the federal Commercial Vehicle Drivers Hours of Service Regulations (*2) enacted under the federal Motor Vehicle Transportation Act. (*3). In this regard, the federal regulatory requirements were more onerous that the provincial counterparts: Total Oilfield was in breach of the former but not of the latter. This distinction frames the dispute being the subject of this case. Total Oilfield challenged this administrative penalty by seeking a “judicial review” of same in a proceeding brought before a judge of the Alberta Court of Queen’s Bench. The company questioned the constitutional applicability of the federal Commercial Vehicle Drivers Hours of Service Regulations to its particular trucking operations. Total Oilfield asserted that it is a provincial trucking undertaking subject to the laws of Alberta pertaining to transportation safety on the basis that the nature of its operations is primarily in the rental of oilfield equipment. As submitted by the company:
“… while transportation is also a part of Total Oilfield’s business, Total Oilfield transports its own equipment for its customers almost exclusively. The transportation aspect of its business is largely intraprovincial consisting of the hauling of oilfield equipment from locations within a given province. Interprovincial is a very minor portion of Total Oilfield’s business, and only occurs as needed. The vast majority of Total Oilfield’s business is intra-provincial operating from local bases”.The Outcome of the Challenge to the Penalty and the Crown’s Appeal The judge hearing this challenge declared that Total Oilfield was governed by provincial motor vehicle legislation and regulations and was not subject to the federal Motor Vehicle Transportation Act and the Commercial Vehicles Drivers’ Hours of Service Regulations. Accordingly the penalty assessed was deemed improper as the federal regulation did not apply. The Attorney General of Canada appealed this ruling to the Alberta Court of Appeal. Three issues were raised on the appeal:
1. What is the test for determining legislative jurisdiction over a particular “transportation undertaking”? 2. Is Total Oilfield, at least in part, a “transportation undertaking” for constitutional purposes? 3. Which level of government has jurisdiction over Total Oilfield’s trucking operations?1. What is the test for determining legislative jurisdiction over a particular “transportation undertaking”? As mentioned above, the federal and provincial governments share legislative authority over transportation undertakings. Section 92(10) of the Constitution Act 1867 provides: Subjects of Exclusive Provincial Legislation
In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subjects next hereinafter enumerated; that is to say,…In other words, a “local” work and undertaking that does not “connect the Province with any other or others of the Provinces, or extend(ing) beyond the Limits of the Province” falls under exclusive provincial legislative authority. Section 91(29) of the Constitution Act 1867 in turn provides:10. Local Works and Undertakings other than such as are of the following Classes: Lines of Steam or other Ships, Railways, Canals, Telegraphs, and other Works and Undertakings connecting the Province with any other or others of the Provinces, or extending beyond the Limits of the Province;(Emphasis added)
It shall be lawful for the Queen, by and with the Advice and Consent of the Senate and House of Commons, to make Laws for the Peace, Order, and Good Government of Canada, in relation to all Matters not coming within the Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces; … the exclusive Legislative Authority of the Parliament of Canada extends to all Matters coming within the Classes of subjects next hereinafter enumerated’ that is to say,The foregoing refers to what is essentially referred to as the residual legislative prerogative of the federal government: it can legislate in areas save those explicitly assigned exclusively to the provinces. Accordingly, jurisdiction over works and undertakings extending beyond the limits of any one province come within the legislative jurisdiction of the federal government. The Appeal Court (*4) noted that transportation jurisdiction under the Constitution assigns legislative authority to set safety standards and regulate commercial transportation. Local transportation undertakings will be subject to provincial transportation safety statutes and regulations, whereas interprovincial and international transportation undertakings must comply with federal transportation safety statutes and regulations. The Appeal Court also noted that an assessment of whether a transportation undertaking will be federal or provincially regulated falls to be determined by sections 92(10)(a) and 91(29) cited above. In this regard the Court cited case law precedent that in order to determine whether a particular transportation undertaking “extends beyond the limits of the province” it must be determined whether the undertaking “continuously and regularly” crosses provincial or international borders. This assessment focuses on the company’s actual and ongoing transportation activities. If a company carries on more than one undertaking (i.e. business activities other than commercial transportation) the transportation jurisdiction assessment is only concerned with the company’s transportation activities. It does not matter what ultimate purpose the transportation activities serve, because jurisdiction is not divided on the basis of whether a transportation undertaking is a stand alone business or whether it is carried out in support of some other business activity. Rather, “legislative activity over transportation undertakings is based on the territorial scope of their activities” (*5). Accordingly, a transportation undertaking whose vehicles continuously and regularly cross provincial boundaries will be subject to federal transportation regulation, even if the interprovincial operations are a small fraction of the undertaking’s overall transportation activities. Once there is an operation or an undertaking capable of connecting provinces then the test is one of extent. Not every undertaking capable of connecting provinces or capable of extending beyond the limits of a province does so in fact. The words “connecting” or “extending” in s. 92(10)(a) must be given some significance. For example a trucking company or a taxicab company taking goods or passengers occasionally and at irregular intervals from one province to another would hardly be said to be an undertaking falling within s. 92(10)(a). Citing the decision of Re Tank Truck Transportation (*6) the Court noted as follows:29. Such Classes of Subjects as are expressly excepted in the Enumeration of the Classes of Subjects by this Act assigned exclusively to the Legislatures of the Provinces.(emphasis added)
I think that to connect or extend, that activity must be continuous and regular, but if the facts show that a particular undertaking is continuous and regular, then it does in fact connect or extend and falls within the exception at s. 92(10)(a) regardless of whether it is of greater or lesser extent than that which is carried out within the province.It follows then that where the “continuous and regular” standard is not met, a transportation undertaking that operates within the boundaries of one province will be subject to provincial transportation law, even if it makes casual interprovincial trips on an irregular basis. 2. Is Total Oilfield, at least in part, a “transportation undertaking” for constitutional purposes? Total Oilfield asserted that it is not a transportation undertaking as it is not a transportation company, but rather one engaged in the equipment rental business. The Court rejected this argument, citing the established principle that a single company can operate multiple undertakings at the same time. The Court cited as an example a retail business that offers delivery. If the retailer operates its own fleet of delivery trucks to deliver merchandise to customers it is a transportation undertaking even though its primary business is the sale of merchandise. Whether the delivery trucks are subject to federal or provincial transportation law will depend on whether they continuously and regularly cross borders. Conversely, a retailer that hires a third party carrier to deliver merchandise to customers does not operate a transportation undertaking, but will be merely considered to be a shipper of goods. The Court found that Total Oilfield operates as a transportation undertaking as it uses its own fleet of trucks to physically carry goods between points. The Court found support for this finding in light of the company’s voluntary registration in the Prorate program, and in the broad reach of motor carrier safety related legislation (whether federal or provincial) that regulate the transportation of goods by motor vehicle: there is strong policy that a trucking company be regulated as such once it puts tractors and trailers “on the road”. 3. Which level of government has jurisdiction over Total Oilfield’s trucking operations? The Court found that the evidence supported a finding that Total Oilfield continuously and regularly carried goods across provincial borders so as to come within federal jurisdiction. Total Oilfield’s cross border trips were not exceptional, one-off rare occurrences. Rather, the evidence showed that there were on average of 70 interprovincial trips monthly. Conclusion As mentioned in an endnote referred to above to this article, the Court actually ruled by way of a majority being two of the three appellate judges hearing the matter. The Court (or, more specifically, the majority of the judges) accordingly found that Total Oilfield’s trucking operations are an interprovincial undertaking within the legislative purview of the federal government. Accordingly the administrative penalty in question was valid and enforceable as against it. The dissenting judge approached the analysis differently. This judge found that the essential operating nature of Total Oilfields’ business was that of an integrated equipment rental company that only happens from time to time to deliver its equipment across provincial borders. This judge parted ways with the other judges on a preliminary characterization of the Total Oilfield business. Finding that Total Oilfield was not in the transportation business, it was accordingly unnecessary to proceed as the majority had with an analysis as to whether Total Oilfield’s cross border operations are “continuous and regular”. Accordingly, the dissenting judge stated, Total Oilfield’s operations would fall under provincial legislative jurisdiction, even though it operates in more than one province, because it is not the type of transportation operation “connecting provinces” contemplated by s. 92(10). Of course, the majority ruling “carried the day” and Total Oilfield remained subject to the payment of the administrative penalty in question. The take away? Those responsible for regulatory compliance with enterprises that operate fleets must heed the approach of the majority of the Court in this case: if a truck is being operated, one then looks to the territory covered by the trucking operation as opposed to focusing on whether the business essentially involves something other than trucking. If there is, in fact, a trucking undertaking, and cross border crossings are “regular and continuous”, compliance will be expected with the federal regulatory regime in Canada – which can be more onerous in certain respects than the provincial regime. Gordon Hearn Endnotes (*1) 2014 ABCA 250 (CanLII) (*2) SOR / 2005-313 (*3) RSC 1985, c. 29 (3rd Supp) (*4) The Appeal Court actually split its decision by virtue of a majority of the court (2 judges) ruling as to one particular outcome, with the remaining third judge ruling by way of “dissent”. The analysis in this article of the Court’s ruling then naturally tracks the analysis and disposition by the “majority” as this result is what is binding on the parties. The “dissenting opinion” is the subject of comment below. (*5) Tessier Ltee. v. Commission de la santé et de la securite du travail  2 S.C.R. 3 (*6)  1 O.R. 272 (C.A.)
6. One Claim, Two Arrests? No DiceFederal Court of Appeal confirms admiralty claimants unable to arrest multiple ships in respect of single claim Recently, in Westshore Terminals Limited Partnership v. Leo Ocean, S.A., 2014 FCA 231 (C.A.), the Federal Court of Appeal unanimously confirmed that in Canada, a claimant in an admiralty action commenced in the Federal Court may arrest either the offending ship, or any of its sister ships, but not both. While the appellant had argued that the interplay between sections 43(2) and 43(8) of the Federal Courts Act, R.S.C 1985, c. F-7 (the “Act”) enabled it to simultaneously arrest more than one ship in connection with a claim (involving only one ship), the Court disagreed. The Court also ruled that a Letter of Undertaking (“LOU”), which the parties had entered into following the arrest of the offending ship, was valid and binding. This case stands, first, as a clarification of the law surrounding the arrest of ships in admiralty actions in the Federal Court system; and, second, of the continued importance of retaining competent counsel to advise in specialized legal areas (such as maritime law) before entering into legally binding contracts. Failure to do so could have serious consequences. Facts As the lower court’s decision in this matter is the subject of a case comment entitled “Arrest of Offending Vessel and Sister Ship”, featured in the June 2014 edition of the Fernandes Hearn LLP newsletter, the facts of this case can be quickly revisited. The “Cape Apricot” (the “Vessel”) was a ship owned by the respondent, Leo Ocean, S.A. (“Leo”). On December 7, 2012, the Vessel was in Vancouver, at a marine facility owned by the appellant, Westshore Terminals Limited Partnership (“Westshore”). The Vessel struck and damaged a trestle leading from the shore to a berth at the facility. The facility required repairs estimated to run as high as $60 million. Westshore immediately commenced an action in the Supreme Court of British Columbia (“BCSC”), and arrested the Vessel. Over the next five days, the parties’ counsel negotiated the release of the Vessel from arrest. During the course of the negotiations, Leo’s counsel expressed his view to Westshore’s counsel that security for Westshore’s claim against Leo was limited to the value of the Vessel, and that Westshore’s right to arrest a sister ship was questionable. Ultimately, the parties agreed to a Letter of Undertaking (“LOU”) that provided, amongst other things, that security would be furnished for the amount of $26 million. It was also agreed that Westshore’s recovery would not be limited to that amount. In exchange, Westshore agreed to release the Vessel from arrest, and also agreed to refrain from arresting any other ship owned by Leo. Westshore then had a change of heart. In a subsequent conference call, Westshore’s counsel advised Leo’s counsel that the term in the LOU by which Westshore agreed not to arrest any of the Vessel’s sister ships was unacceptable. Leo’s counsel advised that it was too late, and that there was now a binding agreement between the parties. A dispute formed as concerns the enforceability of the LOU and as to certain rights of arrest being asserted by Westshore. Leo and Westshore agreed that these matters be referred to a judge of the Federal Court. The matter proceeded to a hearing in the Federal Court (*1), where Justice Heneghan ruled that the LOU was valid and legally binding. Justice Heneghan also ruled that as a matter of law, Westshore could not arrest both the Vessel and a sister ship in connection with its claim against Leo. On Appeal to the Federal Court of Appeal Westshore then appealed Heneghan J.’s ruling to the Federal Court of Appeal. On appeal, Westshore advanced essentially the same arguments as it had in the lower court. First, Westshore argued on appeal that the LOU was not binding on the parties because Westshore had relied on what it asserted to be incorrect information provided by Leo’s counsel pertaining to and during the negotiation leading up to the LOU. Accordingly, Westshore invoked the legal doctrine of “mistake”, and argued that the LOU should be set aside. Justice Nadon, writing for the Court, dismissed this ground of appeal. Nadon J.A. held, at paragraphs 41-43, that the impugned information said to have been provided by counsel for Westshore related only to certain opinions being stated by counsel for Leo concerning the state of the law concerning the arrest of vessels. Being merely the expression of “opinion” this did not now entitle Westshore to try to resile fro the LOU Agreement to the extent that there may have been any inaccuracies therein. Accordingly, there was no “mistake” so as to render the LOU unenforceable. Westshore’s second ground of appeal was that the lower court judge erred in her determination that Westshore was not able to arrest more than one ship. This argument involved a consideration of sections 43(2) and 43(8) of the Federal Courts Act, R.S.C. 1985, c. F-7 (the “Act”), which provide as follows:
43. […] (2) Subject to subsection (3), the jurisdiction conferred on the Federal Court by section 22 may be exercised in rem against the ship, aircraft or other property that is the subject of the action, or against any proceeds from its sale that have been paid into court. […] (8) The jurisdiction conferred on the Federal Court by section 22 may be exercised in rem against any ship that, at the time the action is brought, is owned by the beneficial owner of the ship that is the subject of the action.Essentially, Westshore’s argument was that a claimant in its position could avail itself of both s. 43(2) and s. 43(8) of the Act at the same time. Westshore would then be able to simultaneously arrest the offending ship under s. 43(2), and also sister ships under s. 43(8). Ultimately, Nadon J.A. agreed with the lower court judge that Westshore, having already arrested the Vessel, was not able to arrest a sister ship as well. However, his reasons differed slightly from those of Justice Heneghan. At paragraph 63 of his reasons, Nadon J.A. agreed with Heneghan J.’s analysis of s. 43(8) of the Act:
I have no hesitation in adopting the Judge’s analysis of subsection 43(8). Consequently, I can find no error in the Judge’s analysis of the subsection and in her conclusion that the provision does not allow for the arrest of more than one sister ship. If the appellants’ submissions regarding subsection 43(8) were correct, a claimant could arrest, in addition to the offending ship, any number of sister ships to secure its claim. Needless to say, such a change would constitute a dramatic departure from the practice which has prevailed in most maritime countries for at least a century.Nadon J.A. then went further. Whereas Heneghan J. had only considered s. 43(8) of the Act, Nadon J.A. also considered the interplay between sections 43(8) and 43(2). He continued at paragraph 64:
In my view, however, the true question to be determined in this appeal is not whether subsection 43(8) confers a right of multiple arrests, which it does not, but whether a claimant can ask the Federal Court to exercise its jurisdiction in rem both under subsections 43(2) and 43(8) in regard to the same claim and thus obtain the issuance of more than one warrant of arrest to secure his claim. To that question, my answer is that the appellants could either proceed under subsection 43(2) to secure the arrest of the “Cape Apricot” or under subsection 43(8) to secure the arrest of a sister ship. Having elected to proceed under subsection 43(2), the appellants are barred from seeking an arrest under subsection 43(8).In the course of his analysis, Nadon J.A. noted that s. 43(8) of the Act only deals with the arrest of sister ships. It does not say whether a sister ship can be arrested in addition to the offending ship. Moreover, until the section was enacted, he noted that arrests were historically limited to only the offending ship. Nadon J.A. continued, at paragraph 74:
My view is that Parliament, in enacting subsection 43(8), intended to confer upon claimants in Canada the right to arrest a sister ship in lieu of the offending ship. Thus, where a claimant is unable to arrest the offending ship under subsection 43(2) because that ship is not available for arrest in Canada or if that ship’s value is insufficient to properly secure its claim, the claimant may resort to subsection 43(8) and arrest a sister ship of the offending ship. By enacting subsection 43(8) Parliament conferred a true benefit to claimants, a benefit which was unavailable prior to the enactment of the provision. [Italics added.]In other words, Nadon J.A. was of the view that Parliament did not intend for the Federal Court to exercise its jurisdiction in rem under both ss. 43(2) and 43(8) for the same claim. Nadon J.A. also observed that until the creation of an international treaty known as the 1952 International Convention of Certain Rules relating to the Arrest of Sea-Going Ships (the “1952 Arrest Convention”) (*2), it was only ever possible to arrest the offending ship. With the 1952 Arrest Convention, it became possible to arrest either the offending ship or a sister ship. Justice Nadon held that although Canada is not a signatory to the 1952 Arrest Convention, its enactment of ss. 43(2) and (8) of the Act parallels the provisions of the 1952 Arrest Convention. Accordingly, it made sense to construe the provisions as being in keeping with the prevailing customs in the international maritime community, and not as a departure from them. He held, at paragraph 86:
I believe that had Parliament intended to break rank with the international maritime community in regard to the right of arrest, which as I have already said, would constitute a dramatic departure from the accepted practice, section 43 would no doubt have been worded very differently so as to make it clear that in Canada claimants were not restricted to one vessel to secure their claim.In the result, Westshore’s appeal was dismissed. James Manson Endnotes (*1) Westshore Terminals Limited Partnership v. Leo Ocean, S.A., 2014 FC 136 (F.C.) (*2) (May 10, 1952), 439 UNTS 193/UKTS 47 (1960), Cmnd. 1128, Articles 3(1), 3(3)
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